Warren Buffett Just Stepped Down as Berkshire's Chairman After Delivering a 19.7% Annual Return Over 61 Years. Should Shareholders Be Concerned?

Warren Buffett is 96 years old, noting in a letter to shareholders announcing his departure from Berkshire Hathaway (BRKA +0.08%)(BRKB +0.10%) that “Father Time always wins.” After more than 60 years of leading the business, the transition to new leaders has happened fairly quickly. But it was planned well in advance, so investors probably don’t need to be too concerned. Here’s why.

Buffett can’t be replaced

Warren Buffett is a cultural icon whose reach has extended far beyond Wall Street. That said, his investment success is legendary, with annualized returns of 19.7% during his tenure at Berkshire Hathaway. With no intention of slighting new CEO Greg Abel, he will never be Warren Buffett. But that’s also a fairly reasonable statement, since Greg Abel is a different person. He will put his own imprint on the massive conglomerate that Warren Buffett basically created from the remains of a shirt manufacturer.

Still, investors need to remember that Buffett worked with Abel for decades. He helped mold Abel into the leader he is today, including a fairly long period during which Abel was the chosen successor-in-waiting. Abel is steeped in Buffett’s approach and will likely operate similarly to his predecessor on many matters. And, Buffett didn’t exactly cut and run, since he moved from the CEO post to the role of chairman of the board.

That meant that Buffett was there to help Abel through the transition. Now, about nine months later, Buffett has stepped down from his new role, too. But this was a planned transition as well, with his son, Howard Buffett, taking his place. Howard Buffett has served on Berkshire Hathaway’s board for 33 years and on the board of Coca-Cola (KO -0.23%), among others, so he has plenty of experience.

However, Howard Buffett’s primary goal at Berkshire Hathaway is to “guard its culture and values – both worth more than anything on our balance sheet,” according to Warren Buffett. Warren Buffett went on to explain that investors should “think of Howard as a policy the shareholders own and hope never to claim against.” That was a cute tie-in to the company’s insurance operations, but Warren Buffett has basically put in place both a hand-selected, personally trained CEO and a hand-selected safeguard for shareholders (in the role of chairman of the board).

Berkshire Hathaway will change, but probably not much

Just as Greg Abel is not Warren Buffett, Howard Buffett is not Warren Buffett either. So Berkshire Hathaway is going to change now that Warren Buffett has fully stepped away. But investors shouldn’t be too concerned, because Warren Buffett has clearly worked thoughtfully and diligently to ensure as much continuity as possible during this transition period.

In fact, there’s little more Warren Buffett could have done other than to stay on indefinitely. But, as he noted in his typical witty fashion, “Father Time always wins,” and this transition was bound to happen sooner or later. Shareholders should feel lucky that he was around to orchestrate it as he did.